Inside the Smartest Little Company in America

Whit Alexander and Richard Tait, founders of Cranium Inc., had never run a business before. But they did have one thing going for them: brains. That's why they managed to create the fastest-selling independent board game in history.

The creators of the best-selling game Cranium just can't stop creating hit products. How can a company this young be so brainy?

Terry Archibald had worked at Cranium Inc. for only a few months, but he recognized at once that the company was betraying its own principles. Just back from vacation, the local editor of the French Canadian edition of the Cranium game was reviewing translations of some packaging language that had been chosen in his absence. Then he saw the phrase Épatants talents ("splendid talents"). Aware that the boxes for that edition were poised to go into production, Archibald wasted no time. He shot an E-mail to Cranium's marketing team in Seattle, strongly warning them off Épatants. As a concept it was dry. As a collection of sounds it clunked when spoken.

In short, it wasn't CHIFF.

CHIFF -- an acronym for "clever, high quality, innovative, friendly, and fun" -- is both the spirit that animates Cranium and the criterion by which all its decisions are judged. Far removed from rigorous quantitative metrics like Six Sigma, the cheerfully subjective CHIFF has proved to be a reliable guarantor of quality. Cranium's 14 employees -- as well as its suppliers, distributors, and public-relations and advertising agencies -- are so well indoctrinated in CHIFF that they reflexively apply its standards to everything they do. Consequently, workable but uninspiring choices -- the use of the word Épatants, for example -- never get the chance to diminish the brand. At Archibald's suggestion, Cranium substituted Époustouflants, which not only has a more playful definition ("mind-boggling") but also looks funny and is a hoot to pronounce. "We bounced it off a native French speaker here in our office, and he immediately broke into a grin," recalls editorial director Catherine Fisher. "So we knew it was right."

Cranium-the-company has done so much right that Cranium-the-flagship-product sold more than 1 million units in 2001, making it the fastest-selling independent board game in U.S. history despite its $34.95 price tag. Profitable within six weeks of its first product's debut, the company encored this year with a children's game that started winning awards before it left the factory. Eight more Cranium offerings await release. Endorsements have been high profile and ringing: Julia Roberts told Oprah she couldn't stop playing Cranium, and the readers of Playboy and American Woman -- who presumably have little else in common -- are ideal consumers for the game, according to reviews in those magazines.

"Making the money is great, but there are awards and then there are rewards. Our survival and success will come from optimizing fun, focus, passion, and profits. That takes smarts, and we thrive on that."

--Richard Tait

All that success has been reaped by a very young, very small company in a market cratered with failures. Cranium is the first start-up for Whit Alexander and Richard Tait, but they have approached the venture as a game of skill, not luck, and are planning every move with a deliberateness and stated ambition rare even in serial entrepreneurs. Aware that they lacked experience both as company builders and in the toy industry, the cofounders have borrowed from the best, adapting marketing tactics from such industry greats as the makers of Trivial Pursuit and Pictionary and borrowing product-development strategies from Microsoft. At the same time, they have made smartly counterintuitive decisions about distribution and talent that seem to guarantee a steady stream of genuinely new and distinctive products.

Not surprisingly for a couple of guys whose products celebrate the kaleidoscope of human ingenuity, Tait and Alexander are at least as proud of their company's smarts as they are of its success. "Making the money is great, of course," says Tait, "but there are awards and then there are rewards. Our survival and success will come from optimizing fun, focus, passion, and profits. That takes smarts, and we thrive on that."

Making the opening move

With their boyish expressions and frequent grins, Alexander and Tait look right at home in a toy company. But it's just as easy to picture them wandering the halls of Microsoft, where they spent much of the 1990s. Tait, 37, a thin Scot whose speech is still flavored by the Glasgow region, lists "shepherd" on his rÉsumÉ, along with "Microsoft Employee of the Year." Alexander, 40, who has gray hair parted down the side, was an ecologist, teacher, and urban planner before landing at the software giant, where, among other things, he produced Microsoft's Encarta World Atlas on CD-ROM. The partners talk alike -- frequently finishing each other's sentences -- and have begun to think alike as well. Alexander recalls a recent impromptu market-research trip to Barnes & Noble: "I was watching this woman pick up Cranium when I felt a presence. It was Richard, watching her from behind the opposite bookshelf."

Not long after meeting at Microsoft, Tait and Alexander discovered a shared passion for entrepreneurship. In 1997 the pair discussed starting their own dot-com company but found the arena too crowded. "Any idea we'd think of in the technology area was already being done," recalls Alexander. Then one day Tait, who had just returned from a weekend of intensive board-game play in the Hamptons with his wife and another couple, floated the notion that would become Cranium. Board games, he observed, favor people with specific skills. Tait, for example, an ace at Pictionary, was only a remedial Scrabble player. But what if a single game offered so many different activities that anyone could shine? Everyone would have fun. No one would be humiliated. Over a breakfast of huevos rancheros at the Jitterbug restaurant, Tait persuaded Alexander to help him design such a game. "Our goal was to create something entertaining and uproariously funny, to celebrate the array of what people could do," says Tait.

Whit Alexander: Years at Microsoft taught him the importance of developing products quickly and hiring mimes.

With an M.B.A. from the Tuck School at Dartmouth, Tait knew the conventional wisdom: companies design products to meet a need. But that didn't seem quite the right way to think about Cranium. Instead, the two founders decided, they would engineer their game around a "moment," specifically the moment when players "appear smart and funny in front of family and friends." So they designed Cranium with 14 activities that range from spelling words backward to humming to drawing with your eyes shut. "We wanted everyone to high-five their teammate at least once per game," says Tait. "I know that's not a very scientific metric, but that's what we're going for."

That strategy made sense for two reasons. First, it greatly multiplied the opportunities for new products, since the number and variety of "moments" experienced in a human life are relatively large. (By contrast, most board-game makers expand their lines by tweaking the parent game for different age groups, of which there are a limited number.) Second, by appealing to a set of emotions rather than a set of demographics, the game connects players, who bond over references to cultural artifacts and shared reminiscences. Around the company, such embedded emotional cues are called "touchstones." Along with "moments," they create a kind of custom operational vocabulary for the business. "We consider the vocabulary a core asset," says Alexander. "Brands are only relevant when people use them on a daily basis. These words reinforce what all of our employees do every day."

But despite the originality of the partners' approach, Cranium's odds of success were comparable to using all seven letters to hit the triple word score in Scrabble. Some 50% of board games fail in their first year, according to industry estimates, and of the remaining 50%, half fail in the second year. Before Cranium's debut, the industry hadn't had a hit since Pictionary, which came out in 1984. But that didn't discourage Tait and Alexander. They felt the market was ripe for something big.

Using $100,000 of their savings, the two built a playable game prototype and began testing it in early 1998. But as first-time entrepreneurs, "we didn't know how to make it happen," says Tait. "So we dug around." A quick immersion in the game industry -- which included Web research, interviews with specialty retailers, and audiences with the PR team that launched Trivial Pursuit and the creators of Pictionary -- left them comfortable in their knowledge of the market.

Finding a playing field

But where should they sell Cranium? Toy stores were the obvious venue, but neither founder was a big fan of the obvious. So they decided not to compete for a share of the existing game-buying market. Instead, believing that Cranium was innovative enough to create a market of its own, they sought a channel where the product's mere presence would call attention to it. In their minds they weren't selling a game but a social experience.

Since Seattle was their hometown, the founders conducted many of their most important conversations in the plush upholstered armchairs of a local Starbucks. One afternoon they noticed that the latte line parading by represented their ideal audience: 25-to-35-year-old "dating yupsters who wanted to connect with others." Fortuitously, Tait had recently scaled Mount Kilimanjaro with a friend of the man who was then the CEO of Starbucks, Howard Schultz. The founders snagged an introduction and ended up playing a few rounds with the espresso mogul.

Starbucks, it turned out, had long sought a game celebrating coffeehouse culture. Schultz told David Brewster, who was then the company's product manager for retail media, to "make it happen," and by November 1998, Cranium was in some 1,500 Starbucks outlets nationwide. Tait and Alexander had learned from industry experts and from their own focus groups -- at which participants tried to take the product home -- that people who play a game are more likely to recommend it, so they gave Starbucks sample copies for store employees and patrons to play. "That made a huge difference because they started enthusiastically recommending the game," says Brewster. "We couldn't get it out to the stores fast enough in that first holiday season. Even our warehouse was quickly empty."

At the same time, the partners were courting Barnes & Noble. Terese Profaci, the bookstore chain's director of gift merchandising, met with the entrepreneurs in New York City. She recalls that her boss at the time told them, "I don't know why you're here. We don't sell games." But Profaci's boss had her and her staff play a round and ended up stocking Cranium.

The founders also wanted to get Cranium's name out to the public, and that meant advertising. Television, the mainstay of the game industry, was too expensive, so the two lifted a tactic from Trivial Pursuit, which they had stumbled across in their research. For a mere $15,000 they recruited 110 radio stations around the country to have their DJs read Cranium questions over the air and award games to callers with the correct answer. "Hearing a clever question or two gave a minitrial to a broad audience," says Tait.

Studying the grand masters

With orders pouring in from Starbucks, Barnes & Noble, and Amazon.com (which came on board at roughly the same time as the others), Tait and Alexander decided it was time to assume the trappings of a real company. They assigned themselves titles as unorthodox as their product. (Tait is grand pooh-bah, with responsibilities for business operations and marketing; Alexander is chief noodler, with a focus on product development, editorial content, and manufacturing.) Renting space in a downtown Seattle office building, they transformed it into an environmental version of Cranium, with walls of the same red, blue, green, and yellow that appear on the box and carpets of the purple of Cranium clay.

Tait and Alexander got their marketing ideas from game veterans. But to build a company, their benchmark was Microsoft. Like their former employer, Cranium's founders vowed to "hire the smartest people you can get" and to look for employees with skill sets and backgrounds different from their own. Taking that mandate to an extreme, they have hired, among others, a professional mime and a children's art teacher. To attract top talent they offer stock options, which are de rigueur for technology companies but unusual in the game industry.

"We consider [our] vocabulary a core asset. Brands are only relevant when people use them on a daily basis. These words reinforce what all of our employees do every day."

--Whit Alexander

Cranium's product-development techniques also borrow liberally from the software giant's. The detailed, iterative, customer-focused process is so fast that Cranium games typically come together in six months or less. Cranium's product-development team brainstorms; builds a variety of prototypes; chooses a platform (desktop, board, portable); makes decisions about content, packaging, and manufacturing; and tests and retests.

And as Microsoft does with software, Cranium lets real users shape its products. Friends and customers gather frequently for test matches, and the product-development team sets up "intercepts" at the local science center to corral visitors into playing new games. At Microsoft, Tait and Alexander had sometimes been frustrated because the cost of reprogramming and the potentially dramatic ripple effect of changes prevented them from taking too many user suggestions. At Cranium, by contrast, they make copious adjustments. "We might change the rules four times in a night, based on what we're hearing," says Alexander. "All it takes is a little desktop publishing and a printer to offer up another version."

Cranium's founders are borrowing yet another Microsoft page as they introduce versions of the game for the United Kingdom, Australia, Canada, and Germany. At Microsoft, where more than half of revenues come from overseas, consumer products are not translated; they are "localized." The Encarta encyclopedia, for example, lists one height for the Matterhorn in its Italian edition and another height in its French edition, because the two countries disagree -- strongly -- over how tall the mountain is. "We learned to celebrate the local culture," says Tait of his work on Encarta, "and we do the same with Cranium." As a result, someone playing British Cranium might have to use clay to model beans on toast. The Canadian version asks players to draw "hockey hair."

Such attention to differentiation and detail is unusual in the game industry, experts agree. "I'm not sure how many companies do that kind of extensive testing and tweaking," says Sean McGowan, coordinator of the toy industry's media event PlayDate. "Lots of decisions are made based on what's hot, like Harry Potter or Who Wants to Be a Millionaire? Then the question is, 'Is this license going to help sell this cardboard?"

Cranium is also smart enough to recognize the things it isn't smart about. Like many small game companies, it outsources industrial and graphic design, sales, and manufacturing. "We try to be laser focused on our core competencies and resist the temptation to bring it in-house," says Alexander. "Thinking outside the box was easy because we were never in the box," says Bill Furlong, whose title is major mojo but who also answers to director of marketing. "We come up with all kinds of crazy ideas and then get really experienced partners in sales, manufacturing, and PR to tell us why they won't work or how to tweak them so they do."

Setting the rules

But the most important lesson Cranium's founders took from Bill Gates was the power of a mission clearly and consistently communicated. Tait and Alexander recall that back when they worked at Microsoft, you could have asked any of its then 22,000 employees about the company's goal and they wouldn't have missed a beat: "a computer on every desktop and in every home." The need for similar internal branding grew pressing at Cranium in 2000, as it added employees and products and came to rely more heavily on partners, from industrial designers to Webmasters. Ensconced once more in chairs at Starbucks, Tait and Furlong listed the attributes they desired for the games and for the company and, together with Alexander, came up with CHIFF. "CHIFF means that our employees and partners will come to the same decisions Whit and I would, without a lot of hand-holding," says Tait. "Meetings are faster and more efficient, even with foreign manufacturers, because we've created a common language."

Immersion in the company philosophy begins at every new employee's orientation and persists through every meeting, where decisions are benchmarked against a CHIFF checklist. Employees will assure you that anything leaving Cranium Central -- every game piece, every press kit, even the letterhead -- is CHIFF. At a recent development session for a card pack celebrating New York City, a young man gyrated in the manner of a patron of Studio 54, a woman drew the Macy's Thanksgiving Day parade with her eyes closed, and a third employee mixed up the letters of YELLOW CAB so someone else could unscramble them. The first two activities passed muster, but the last one just wasn't CHIFF enough. "There wasn't anything inherently special about a plain yellow taxi," says Alexander.

"What makes this place so different is the attention to detail," says editorial director Fisher. "There's a concern for getting it right all the way down to how flexible the paper is on the drawing pads. You wouldn't believe how many factors we considered just to choose the clay for [children's game] Cadoo. Which felt the nicest? Which smelled good? Which formulation wouldn't stick to kids' clothes?"

Cranium's partners -- from fringe theater groups who write game questions to the company's advertising agency -- have also been indoctrinated, which, Tait says, helps them to focus, prioritize, and identify flaws. When Alexander told a Chinese manufacturing partner about a purple plastic game piece he envisioned putting together with glue, the manufacturer said, "Not CHIFF," and came back with a design for using injection molding that would both make the piece look better and reduce manufacturing steps. "CHIFF," says Tait, "is a way of life."

Winning

Cranium's focus on CHIFF and its reliance on "moments" are helping Tait and Alexander extend the brand. When contemplating Cadoo, a child's version of Cranium, for example, they refused "just to create a junior version of the same thing," says Tait. Instead, Tait and Alexander, both of whom are fathers, recast the Cranium experience through a youthful prism. Cadoo fits in a backpack (although it also has a handle for carrying around), has been reformatted for two players (since kids generally have just one friend over at a time), and encodes answers in a red field that can be penetrated only with special plastic glasses. Originally forecast to sell 12,500 copies, Cadoo won the Oppenheim Toy Portfolio's Best Toy Award in August and was launched in October with orders for 200,000 units.

"If someone had told you that two guys from high tech would use a software-development process to create a hit board game, you would have said they were crazy."

--Richard Tait

More ambitiously, Tait and Alexander are trying to redefine the act of game play as a daily activity. "Cranium might be played every few weeks," says Tait. "We saw other companies like Starbucks that might touch a consumer one to four times per day." The two wanted to create a game with what Web-site designers call "sticky" features: characteristics that bring customers back often and tempt them to stay. The result was Cosmo, an office game that can be played in just a few minutes by employees needing a break. "This brings the Cranium brand touch to the customer every day," says Tait. Other new products also target the corporate market, including an "icebreaker" for meetings that the partners hope will open a distribution channel through corporate trainers.

With their flagship game gaining popularity, Cranium's founders have begun experimenting with mass-market retailers to increase sales. Their first forays are with the relatively hip Target and with Toys "R" Us. Inexperienced in the ways of such partners, Tait and Alexander hope to learn as much as possible from those two relationships before signing with additional national chains.

But new relationships make it harder to keep older relationships special, and Cranium's founders want Starbucks to stay happy. So rather than waiting for a two-digit anniversary to release a deluxe edition, three-year-old Cranium has already launched one, for Starbucks and Starbucks alone. That not only reinforces the primacy of Starbucks as a partner but also helps keep the product pipeline primed. "We think of distribution like a pyramid," says Tait. "We start at the top with a few stores, and as the distribution gets wider, we feed new products into the top of the pyramid and start all over again. It keeps the brand fresher at all levels."

As Cranium enters more channels and engages the corporate market, Tait jokingly speculates that it could become even more like the Redmond giant. "Will we create 'solution providers' like Microsoft has and establish a cadre of certified Cranium professionals?" he muses, smiling. It may not be as ridiculous as it sounds. After all, "if someone had told you that two guys from high tech would use a software-development process to create a hit board game, you would have said they were crazy. But we've done pretty well.

"Can we do this all over again?" asks Tait. "We have no idea. Call us in 2003 and see if we are really that smart after all."

Julie Bick is the author of several books, including the best-selling All I Really Need to Know in Business I Learned at Microsoft: Inside Strategies to Help You Succeed.